UK-based Liberty Steel is looking to sell its Ostrava steelworks in the Czech Republic, while filing for judicial reorganisation in the country.
The company will be withdrawing its preventative restructuring plan to enter into the reorganisation under the country's insolvency act.
It said the restructuring plan was hampered by the weak market in Europe and the "indefinite delay" in the allocation of emissions allowances from the government — the Czech government earlier cited Ostrava's lack of production as a reason for reviewing its free allocation, and had called on Liberty to repay Ostrava monies owed by its group entities.
Liberty said the lack of allowances caused a €43mn hole in its restructuring, and raised the risk of insolvency when allowances need surrendering later in the year.
Liberty's initial restructuring plan was dependent on the sale of those emissions allowances, as well as a hot-rolled coil (HRC) price of over €950/t in July, more than €300/t over the current Argus northwest EU HRC index. The business is currently losing €1mn/d.
Sources suggest that it may be difficult for the company to find a buyer, and that this may help it retain the asset and write down its debt. But relations between the company and government have been very strained in recent months.
Liberty's financial position appears to have worsened of late, resulting in the mothballing of Liberty Merchant Bar and the plan to sell or "recapitalise" its EU rolling lines. The company also recently stopped its Galati blast furnace in Romania, citing a lack of raw materials. At its Rotherham site in the UK, the company has produced less than 10,000t this year, substantially below its capacity.
